The Luxemburg Appellate Court handed down its judgment in The Republic of Kazakhstan v Ascom Group S.A. et al. The Ministry of Justice «n.a. Beketayev» lost again (and quite predictably so). Why is this important and what is going to happen next?

Portal KZ.MEDIA informs on the Luxemburg Court’s decision in Alexey Tikhonov’s article «The Ministry of Justice Lost to Stati Again. This Time — in Luxemburg. Sanctions Are Coming?»

We are certain that the readers of KZ.expert are curious to learn this information so, below, you will find the full text of the article.

The Luxembourg Appellate Court handed down its judgment in The Republic of Kazakhstan v Ascom Group S.A. et al. The Ministry of Justice «n.a. Beketayev» lost again (and quite predictably so). Meanwhile, the Moldovan investors ask the Federal Court to impose financial sanctions against Kazakhstan.

A Definitive Victory?

Now that the Appellate Court has made its decision, the Stati have received the opportunity to arrest Kazakhstan’s properties in Luxembourg. We are talking about the share in Eurasian Resources Group S.a.r.l. (ERG) in which Kazakhstan owns 40% of the capital, the frozen dividends in the amount of 48 $ mln that ERG must pay to Kazakhstan, as well as certain receivables owed to Kazakhstan by Cameco Luxembourg and ArcelorMittal Luxembourg.

What these receivables are and how they have been formed in Luxembourg is yet unknown. However, it is perfectly clear (and we have written on this a number of times) that any commercial debate in the Western jurisdictions invariably leads to the opening of all the closets revealing the numerous skeletons they contain. There is no simple business and no simple commercial debt in the system of economic relationships between Kazakhstan and the West. This is quite obvious to everyone. In a best-case scenario, we are talking about some kind of clever royalties paid to the numerous insiders from the Kazakh business world.

The Luxembourg Appellate Court made its decision in reply to the complaint of Kazakhstan’s Ministry of Justice that was trying to appeal the decision of the Stockholm Arbitration Court made in favor of the Stati back in December 2013 and upheld in December 2016. According to this decision, Ascom Group was eligible for the award in the amount of US450 $ mln spent on the construction of the gas-processing plant in Mangistau.  

Kazakhstan did not agree with this decision and refused to pay. In order to make it pay, the Stati started filing complaints in different countries requesting the local courts to uphold the Arbitration decision. After this, it would be possible to try and arrest Kazakhstan’s assets in these countries. And the Stati were successful in their undertaking. The courts agreed with the decision and sanctioned the arrests. The Ministry of Justice of the Republic of Kazakhstan began to appeal these decisions and unleashed a real legal war that was conducted by Western legal firms hired by Kazakhstan for a great deal of money.

It looks like the total amount spent on these legal actions has long surpassed all the losses from the Stockholm defeat. But the logic of the war was pulling in more and more parties and all kinds of subcontractors. All in all, it was business as usual: «war makes some people rich».

The claims of the Ministry of Justice were based on accusing the Stati of financial deception of the investors. The accusation saw the light of day already after the Stockholm decision was made. An appearance of new accusations after a verdict has been reached is not the best argument in a debate. Let alone a legal battle. Nonetheless, the three courts of the so-call Benelux counties (Belgium, Netherlands and Luxembourg) agreed to review the new arguments presented by Kazakhstan’s lawyers.

Thus, the decision of the Luxembourg Appellate Court may be considered final in the strategy of the Ministry of Justice of the Republic of Kazakhstan that had been trying to prove that the cost of the Mangistau plant construction was artificially inflated while the Stati’s demands were based on fraud. The Luxembourg Court ruled that Kazakhstan «has failed to prove that the Award was made on the basis of false statements and documents.» It is unlikely that the other two courts operating in the similar judicial systems of the three countries would reach different verdicts.

Anatolie Stati, the CEO and the only shareholder of Ascom Group S.A., gives his own assessment of the situation in the press-release written on behalf of Ascom Group. In his opinion, a consensus has already been formed in the international judicial system regarding both the Stockholm Arbitration Court decision and Kazakhstan itself that is trying to avoid responsibility for not complying with the international obligations it has undertaken.

He is probably talking about the Energy Charter that Kazakhstan signed in 1994 at the peak of the Caspian oil Klondike.

In other words, one can safely say that the «fraud» argument has bitten the dust.

The New Bets

It is unlikely that the Luxembourg decision was a surprise for Kazakhstan’s Ministry of Justice. We have already pointed out that Marat Bekebayev’s attorneys want to reach a new level of the conflict escalation by de-facto accusing the Stati of creating an international criminal financial hub that had been distributing the money received from the Vitol international trading corporation down the whole chain of politicians and shady dealers in the countries where the Stati conduct their business.

The Moldovan investors, too, are not sitting idly. Almost simultaneously with the new steps taken by the Ministry of Justice, the Stati have addressed the United States District Court for the District of Columbia (Washington, D.C.) demanding to punish Kazakhstan for its complete and quite deliberate reluctance to obey the decisions of the US court.

We are talking about the fact that the US Court demanded from the Ministry of Justice of the Republic of Kazakhstan to present the entire list of Kazakhstan’s assets in the USA (and other countries). Beketayev’s attorneys claim that no such assets exist on the US soil. It is quite obvious that such claims are but mudding the waters. As likely as not, these assets are being hastily «repackaged» into different schemes in order to shield them from the US penalties. It is hard to imagine how dangerous this scheme is for its authors and for entire Kazakhstan.

In their complaint, the Stati are already preparing for such a scenario. They are demanding that the US Court imposes financial sanctions against the Kazakh government accusing it of contempt of court. Such an accusation is a very serious matter in the United States. And the likelihood of imposing financial sanctions against Kazakhstan is looking quite real.

And to think, that it all began with a regular raider attack on a gas plant…